The New Plan for Western Companies: ABC - 'Anything But China'
A new trend is emerging among Western tech companies: "Anything But China" (ABC). What began as a cautious diversification strategy has now become a full-blown shift, as businesses scramble to reduce their dependence on Chinese suppliers.
- For years, many multinational companies followed a "China Plus 1" strategy, maintaining a strong manufacturing base in China while supplementing it with suppliers from other countries. The goal was to protect supply chains from unforeseen disruptions.
- However, recent geopolitical tensions, coupled with the lasting impact of China’s stringent Covid-19 lockdowns, have pushed companies to adopt a far more aggressive approach—now they seek to move production entirely out of China.
According to the Semiconductor Industry Association in Malaysia, one of the top destinations for tech companies looking to relocate, companies are redesigning their business strategies, shifting from a 'just-in-time' model to what is being called a 'just-in-case' strategy.
Opportunities for Asia and Latin America
As Western companies pull back from China, opportunities are emerging for countries across Southeast Asia and Latin America. Nations like Vietnam, India, and Mexico have become major beneficiaries, attracting both assembly lines and more sophisticated manufacturing processes.
- Unlike the first wave of diversification, which focused primarily on assembling products outside of China, this second phase involves shifting component manufacturing — such as sensors, printed circuit boards, and power electronics — which requires significant investments in machinery and infrastructure.
- According to a recent S&P report, these moves signal a more permanent relocation of global supply chains.
- A key turning point came during China’s draconian Covid-19 lockdowns, which led to production bottlenecks affecting everything from iPhones to automobiles. This crisis exposed the dangers of overreliance on a single country and acted as a wake-up call for companies worldwide.
Since then, the accelerating tech rivalry between the U.S. and China has only heightened the urgency. With the prospect of higher tariffs and tougher trade restrictions, companies are increasingly motivated to build manufacturing resilience outside of China.
The Frontline of the U.S.-China Tech Battle
The "Anything But China" trend is most pronounced in industries linked to semiconductors—the critical technology at the heart of U.S.-China friction.
- Over the past two years, the U.S. has taken decisive steps to limit China’s access to advanced chips and manufacturing equipment. In response, China has intensified efforts to create its own domestic chip ecosystem.
- This tech decoupling is already reshaping global supply chains. For example, AI servers, previously assembled in China, are now increasingly being produced in places like Mexico and Malaysia following U.S. export restrictions on artificial-intelligence chips.
- The $53 billion U.S. Chips Act has further accelerated this shift. By offering generous incentives to companies investing in semiconductor production on American soil, the act aims to reduce the country’s dependence on foreign suppliers.
This legislative push, combined with new tariffs and geopolitical uncertainty, is driving companies to make long-term investments in more diversified, resilient supply chains.
Disclaimer
Please note that Benchmark does not produce investment advice in any form. Our articles are not research reports and are not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.
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